The currency war salvos just keep on coming. Moments ago the BOK unexpectedly (the move was predicted by just 2 of 17 economists polled by Bloomberg) cut its policy rate from 2.00% to a record low 1.75%, in what is clearly a full-blown retaliation against the collapse currency of its biggest export competitor, Japan, whose currency has cratered to a level that many in South Korea believe has become a direct subsidy for its competing exports. As such the only question is why the BOK didn’t cut earlier. And following the surprise rate cut by Thailand earlier today, the “surprise” South Korean rate cut means there are now 24 easing policy actions by central banks in 2015 alone.

The Bank of Korea, which controls the world’s eighth-biggest foreign-exchange reserves, boosted gold holdings for the second time this year as investors sought safer assets amid Europe’s debt crisis.

The central bank bought 15 metric tons last month, boosting holdings to 54.4 tons, which is equivalent to 0.7 percent of its total reserves, Lee Jung, head of the investment strategy team at the bank’s Reserve Management Group, told reporters in Seoul.

Central banks are expanding reserves for the first time in a generation as the precious metal is in the 11th year of a bull market. Purchases of as much as 450 tons in 2011 may be repeated next year as Asian nations and emerging economies diversify their reserves, UBS AG said Nov. 30.

“They want to diversify,” Gavin Wendt, the founder and senior resource analyst at Sydney-based Mine Life Pty., said by phone today. Investors and “central banks are pretty nervous about all currencies, not just the U.S. dollar.”

Gold has risen about 23 percent this year, reaching an all- time high of $1,921.15 an ounce on Sept. 6 and beating equities, treasuries and other commodities. The U.S. dollar, which typically moves inversely to bullion, is down about 1 percent this year against a basket of six major (worthless fiat) currencies.

Oct. 19 (Bloomberg) — South Korea will guarantee $100 billion in bank debts and supply lenders with $30 billion in dollars to stabilize its financial markets.

The government will provide tax benefits for long-term equity and bond investors, while the Bank of Korea will buy repurchasing agreements and government bonds to boost won liquidity, the heads of the finance ministry, central bank and financial regulator said in a statement from Seoul. Policy makers held an emergency meeting on Oct. 17 to hammer out the plan.

South Korea is struggling with Asia’s worst-performing currency, a shortage of U.S. dollars and a stock market that has lost 38 percent this year. The guarantee on bank debts comes after Standard & Poor’s said last week it may cut the credit ratings of the nation’s largest lenders, which triggered the worst plunge in the won since the International Monetary Fund bailed the nation out in December 1997.

“They have to do that because the market was pushing them by attacking the Korean won,” said V. Anantha-Nageswaran, chief investment officer for Asia Pacific at Bank Julius Baer (Singapore) Ltd., part of Switzerland’s biggest independent money manager for the wealthy. “They know what the stakes are. The currency could completely careen out of proportion.”